Buy DLF; target of Rs 258: HDFC Securities
HDFC Securities is bullish on DLF has recommended buy rating on the stock with a target price of Rs 258 in its research report dated August 01, 2019.
August 02, 2019 / 11:16 AM IST
HDFC Securities' research report on DLF
1QFY20 Revenue/ EBITDA came in 41/63% below our estimate while APAT was lower by 75%, which was partly due to adoption of IND AS 116, pertaining to lease contracts effective April 1, 2019. DLF achieved Rs 7bn of net pre-sales during 1QFY20 with ~44% of the pre-sales driven by the luxury category Camellias project. The company has maintained Rs 27bn pre-sales guidance for FY20E, which will be contributed by Phase V – Rs 10bn, Rest Of Gurugram – Rs 8bn and balance Rest Of India. DCCDL 1QFY20 rental income came in at Rs 7.2bn up 6% QoQ (annualized Rs 29bn). During the quarter, Mall of India, Noida was transferred to DCCDL for Rs 29.5bn. DCCDL has ~30mn sqft of operational lease assets with another 3.4mn sqft under construction. Future development pipeline is ~22.5mn sqft. DLF expects DCCDL rental income to increase to Rs 38bn exit by FY20E (vs Rs 29bn now) and Rs 47bn by FY22E. During the quarter, Rs 22.5bn was raised via conversion of the warrants issued to promoter/ promoter group companies at Rs 215.25/sh. Out of the total sum raised, Rs 8.1bn was utilized towards land commitments. During 1QFY20, DLF generated Rs 2bn cashflow. This is expected to grow to Rs 4bn by 3QFY20E, post DCCDL settlement.
We maintain BUY on DLF post positive pre-sales trajectory in Phase V projects, debt reduction and strong lease rental momentum. Our SOTP-based TP is maintained at Rs 258/sh. DLF balance sheet is strong post QIP and promoter fund infusion.
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